By David Milliken and Huw Jones

LONDON (Reuters) – Britain’s taxpayers will pay about 120 million pounds ($168 million) to compensate investors who lost money after the 2019 collapse of investment firm London Capital & Finance, the finance ministry said on Monday.

The ministry said it would compensate 80% of losses made by holders of bonds from LCF, up to a maximum of 68,000 pounds per person. About 8,800 people will be entitled to compensation.

“The situation regarding LCF is unique and exceptional and the government has decided to establish a compensation scheme for LCF bondholders in this instance,” said John Glen, economic secretary to the Treasury.

LCF collapsed in early 2019, leaving 11,600 investors facing losses of up to 237 million pounds. An independent report pointing to failures by the Financial Conduct Authority and its then head Andrew Bailey, who is now the governor of the Bank of England. The BoE had no comment on Monday.

The government expects to compensate all bondholders within six months of passing legislation, which it will bring forward as soon as parliamentary time allows.

“Bondholders should be vigilant to the risk of scammers posing as services to help them claim,” it said.

While LCF was regulated by the FCA, the mini-bonds it sold were unregulated.

The government said on Monday it would consult on proposals to bring the issuance of the non-transferable debt securities known as mini-bonds into the scope of financial services rules. This could include having to publish a prospectus as when issuing shares on the stock market.

The unlisted mini-bonds, used to raise funds for small companies, cannot be sold onwards by the investor and must be held to maturity.

Britain’s Financial Services Compensation Scheme, which has a limited scope and is generally restricted to bank deposits, has already paid out 57 million pounds to 2,800 LCF bondholders.

Payments under the FSCS are funded by a levy on financial institutions rather than out of general taxation.

An attempt by some LCF bondholders to force the FSCS to pay further compensation for their losses was rejected by a court last month, piling pressure on the government to step in.

The finance ministry said any compensation received from other schemes would be deducted from the compensation it would pay out. The cap for individual payments was set at 80% of the 85,000 pounds that is covered under the standard bank deposit guarantee.

The FCA said that together with the Serious Fraud Office, it is continuing to investigate the circumstances surrounding the sale of mini-bonds by LCF.

London Economics consultants said in a report for the finance ministry on Monday that at least 68 businesses issued more than 152 mini-bonds in the UK between 2009 and 2019, together worth more than 815 million pounds.

($1 = 0.7164 pounds)

(Reporting by David Milliken and Huw Jones; editing by William James and Hugh Lawson)